The average reported retirement age is 61, according to Gallup data. However, it could take 30-plus years to prepare for a comfortable future. Whether you plan to live in an RV or a beachside bungalow – your retirement dreams won’t become a reality without a plan.
Here are some questions you should ask yourself when thinking about retirement:
- When do I want to retire?
- How much money will I need to save by the time I retire?
- How much will I need to invest every month to reach my retirement goals?
- Which retirement accounts should I use?
The sooner you start planning for retirement, the faster you’ll be able to make progress.
Set your retirement goal.
The first step is determining how much money you will need in retirement. That number will depend on your current income and expenses, and how you think those expenses will change in retirement. Be realistic when figuring out your costs. For example, if your house will be paid off by the time you retire, you don’t need to save for a monthly housing expense. But if you’d like to travel across the country twice a year in retirement, you should save for that expenditure.
Contribute to your 401(k).
If you have an employer-sponsored retirement plan like a 401(k) and your company matches a portion of your contributions, it’s in your best interest to sign up. Ask your human resources department for the details. If you can afford to, contribute enough to meet the matching funds that your company offers, or more.
The most common employer match is 50% of contributions, up to 4% of salary. That means free money could be yours – up to 2% of your salary each year.
Add a secondary investment option.
There are also other retirement savings accounts you might want to consider like a Roth IRA (Individual Retirement Account). Roth IRAs are especially beneficial because the money you invest grows tax-free, and you won’t be taxed later when you withdraw money in retirement. IRAs are also easy to manage on your own and don’t require professional guidance.
We've made it easy to save money tax-free. Learn more about our new Roth IRA. Anyone with an income can begin making contributions immediately.
Pay down high-interest-rate debt.
Discussing debt may seem out of place in a blog about retirement planning. However, carrying a balance on your credit card(s) and making interest-only payments can derail your retirement plans.
Plan to pay off all your high-interest debt before retirement. You’ll save more in interest by paying it off than you stand to earn through investing.
The bottom line is, you can retire as soon as you have enough money saved to replace the income you earn from working.